Canola could benefit from pressure on palm oil

Pepsi now has a firm position on palm oil, which could be good news for Canada’s canola oil industry.

In February PepsiCo, a company with annual revenues of more than $65 billion and about 260,000 employees, released a comprehensive policy on sustainable palm oil. It includes commitments to no deforestation, no development on peat lands and no exploitation of workers or indigenous peoples. In shorthand, Pepsi calls the policy NDPE.

“It applies to all palm and palm kernel oil that we use globally and covers our entire supply chain, from direct suppliers to production sources at the group level, meaning NDPE should be applied across their entire operations and third-party supply chain and not limited solely to the palm oil sold to PepsiCo,” Pepsi says in a company document.

“Our policy applies to all of PepsiCo’s operations, subsidiaries, joint ventures, brands and products worldwide.”

On its website, Pepsi says it’s one the biggest buyers of palm oil in the world. Despite its size, it purchases less than one percent of the global supply of palm oil.

“Which we use primarily in snack manufacturing because of its wide availability and shelf stability. In the United States, we use almost no palm oil, but it is used in Asia and other markets,” PepsiCo says.

“We have a complex global supply chain with 54 direct suppliers sourcing from more than 1,500 mills and tens of thousands of farmers who grow the palm.”

Pepsi, which makes Frito-Lay snack foods, has been working on its palm oil policies for several years. It planned to fully implement the strategy this year.

“We commend PepsiCo for adopting a comprehensive policy and leading actions that … will drive change in its palm oil supply chain as well as the broader palm oil industry,” said Robin Averbeck, agribusiness campaign director with the Rainforest Action Network, an environmental group based in San Francisco.

For years, environmentalists have campaigned against the palm oil industry, arguing that palm plantations threaten wildlife habitat and destroy beneficial peatlands, which sequester a massive amount of carbon dioxide.

Unilever, which buys 785,000 tonnes of crude palm oil and around 450,000 tonnes of palm kernel oil every year, also has a sustainable palm oil policy.

Such corporate policies should curtail the expansion of global palm oil production, dominated by Malaysia and Indonesia. Over the last 30 years, palm oil production has boomed, going from 10 million tonnes in 1990 to 75 million tonnes last year.

Production continues to expand, but the rate of growth is slowing.

“That’s important to understand. Supplies are still rising but … this is not going to continue,” David Mielke, a market analyst with Oil World, the German research company that specializes in the global oilseeds market, said in 2019.

“Environmental issues or labour issues are going to cap or further limit the growth, which in the years ahead will create new marketing opportunities for Canadian canola oil.”

Mielke expects vegetable oil demand to rise in the next decade, particularly in developing countries and emerging economies.

Oil and fat consumption is 50 to 60 kilograms per year in regions such as North America and Europe but only 15 kg per year in highly populated countries such as Nigeria, Bangladesh, India and Vietnam.

If the 1.3 billion people in India increased their annual consumption to 20 to 25 kg per year, it would bolster demand for all vegetable oils.

Contact robert.arnason@producer.com

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